Share-Based Compensation (Tables)

12 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensation Cost Relating to Share-Based Payments

The amounts and location of compensation cost relating to share-based payments included in the consolidated statements of income is as follows:

(Millions of dollars)	2016		2015		2014
Cost of products sold	$	29	$	23	$	23
Selling and administrative expense	106		82		74
Research and development expense	22		17		16
Acquisitions and other restructurings	39		44		—
	$	196	$	166	$	113

Assumptions for Estimation of Fair Values of Stock Appreciation Rights Granted During Reporting Periods

The fair value was estimated on the date of grant using a lattice-based binomial option valuation model that uses the following weighted-average assumptions:

	2016	2015	2014
Risk-free interest rate	2.17%	2.20%	2.31%
Expected volatility	19.0%	19.0%	19.0%
Expected dividend yield	1.76%	1.78%	2.00%
Expected life	7.6 years	7.6 years	7.8 years
Fair value derived	$27.69	$24.82	$19.90

Summary of SARs Outstanding

A summary of SARs outstanding as of September 30, 2016 and changes during the year then ended is as follows:

	SARs (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (Millions of dollars)
Balance at October 1	7,264		$	87.07
Granted	1,660		150.12
Exercised	(1,740	)	75.70
Forfeited, canceled or expired	(158	)	129.98
Balance at September 30	7,027		$	103.83	6.34	$	533
Vested and expected to vest at September 30	6,743		$	102.57	6.26	$	520
Exercisable at September 30	4,192		$	83.58	4.98	$	403

Summary of Stock Options Outstanding

A summary of stock options outstanding as of September 30, 2016 and changes during the year then ended is as follows:

	Stock Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (Millions of dollars)
Balance at October 1 (A)	1,139		$	79.47
Exercised	(632	)	79.27
Forfeited, canceled or expired	(12	)	68.40
Balance at September 30	495		$	79.99	3.41	$	49
Vested at September 30	490		$	79.78	3.39	$	49
Exercisable at September 30	452		$	77.72	3.27	$	46

(A) Represents options granted upon the conversion of pre-acquisition equity awards of CareFusion, as previously discussed.

Summary of Performance-Based Restricted Stock Units Outstanding

A summary of performance-based restricted stock units outstanding as of September 30, 2016 and changes during the year then ended is as follows:

	Stock Units (in thousands)		Weighted Average Grant Date Fair Value (A)
Balance at October 1	1,139		$	115.52
Granted	507		153.73
Distributed	(193	)	72.14
Forfeited or canceled	(340	)	90.08
Balance at September 30(B)	1,112		$	148.27
Expected to vest at September 30(C)	705		$	147.79

(A) Reflects an increase in fair value which resulted from a modification of performance conditions approved during the first quarter of 2016.

(B) Based on 200% of target payout.

(C) Net of expected forfeited units and units in excess of the expected performance payout of 77 thousand and 329 thousand shares, respectively.

Summary of Time-Vested Restricted Stock Units Outstanding

A summary of time-vested restricted stock units outstanding as of September 30, 2016 and changes during the year then ended is as follows:

	Stock Units (in thousands)		Weighted Average Grant Date Fair Value
Balance at October 1	3,067		$	101.88
Granted	945		145.57
Distributed	(879	)	87.87
Forfeited or canceled	(549	)	99.36
Balance at September 30	2,584		$	123.16
Expected to vest at September 30	2,414		$	122.11